Hubs and Authorities in the World Trade Network
This paper, Hubs and Authorities in the WTN Using a Weighted HITS Algorithm, by Deguchi et al, explores the World Trade Network (WTN), which is a network of the world’s trading units, linked by imports and exports. In particular, the researchers investigate its properties as a social network, using the hubs and authorities algorithm to reveal which countries have the most influence as importers and exporters. This gives a more holistic picture than simply analyzing in-links and out-links since each node is scored based on its interactions with the entire network. In this picture, a hub corresponds with the economic notion of hub, defined as a country with many outgoing links with a large amount of trade; whereas an authority is a country which imports from many influential trading partners. Furthermore, the researchers use a weighted variant of HITS that accounts for the volume of trade along each edge, which allows us to make use of the fact that some trading bonds are stronger than others. We compute the HITS scores over time (over a period from 1992 to 2012) to see how the distribution of economic power evolves in the network. From this information the researchers find interesting trends.
The most prominent change is the rise of China, especially after its entry into the World Trade Organization in 2002. Besides becoming the largest hub country in this period (meaning it is a huge exporter), it has more recently risen as one of the largest authorities, suggesting that it is shifting to a market economy (which can be explained by increasing incomes and the growth of a middle class). Due to China’s strong hub status, Hong Kong, a major trading partner, acquires an interesting role: we see that its authority value is disproportionately high to its import share, compared to a similar authority such as Japan. In fact, Hong Kong’s authority score increased dramatically after increasing trade with China. This rapid change implies that it has taken great advantage of transit trade: Hong Kong has become China’s most important channel for its exports.
Also informative is the United States, with disproportionately high authority and hub scores compared to its direct volume of imports and exports. This suggests that it benefits from many influential trading partners, making it a sort of nexus of trade. In fact, it allows us to view the network as having a “core-periphery” structure, with central, very influential countries like the US connecting together many different groups. This is supported by the fact that we have agreements like NAFTA which connect the US to other influential countries. The EU with its favorable regulations for member countries forms another tight group within this core.
An interesting follow-up might be to use the HITS approach to investigate domestic trade networks and compare networks between countries to see how domestic trade is systematically different in hub versus authority countries, or countries with different economic and political systems.
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4106762/